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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. A good for which higher income increases demand






2. Entry of new firms shifts the cost curves for all firms downward






3. The mechanism for combining production resources - with existing technology - into finished goods and services






4. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






5. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






6. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






7. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly






8. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






9. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






10. Occurs when LRAC is constant over a variety of plant sizes






11. MUx / Px = MUy/Py or MUx/MUy = Px/Py






12. Entry (or exit) of firms does not shift the cost curves of firms in the industry






13. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






14. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






15. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms






16. ATC = TC/Q = AFC + AVC






17. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.






18. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good






19. The difference between total revenue and total explicit costs






20. Exists at the point where the quantity supplied equals the quantity demanded






21. The change in quantity demanded resulting from a change in the price of one good relative to other goods






22. A firm that has market power in the factor market (a wage-setter)






23. Demand for a resource like labor is derived from the demand for the goods produced by the resource






24. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






25. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






26. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






27. Entry of new firms shifts the cost curves for all firms upward






28. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






29. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






30. AVC = TVC/Q






31. Ei > 1






32. Es = (%dQs) / (%dPrice)






33. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






34. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






35. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






36. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






37. The imbalance between limited productive resources and unlimited human wants






38. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






39. Total product divided by labor employed. APL = TPL/L






40. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






41. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






42. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






43. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






44. The output where ATC is minimized and economic profit is zero






45. The total quantity - or total output of a good produced at each quantity of labor employed






46. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power






47. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






48. A good for which higher income decreases demand






49. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






50. The marginal utility from consumption of more and more of that item falls over time